Hold Steel Authority of India; target of Rs 107: Prabhudas Lilladher

hold

Prabhudas Lilladher's research report on Steel Authority of India

SAIL delivered strong operating performance during the quarter, driven by 16.3% YoY volume growth on a lower base and supported by the consumer/ infrastructure sectors. Average NSR declined 1.6% QoQ due to decline in flats product prices since mid-2024, though it was somewhat negated by increase in longs prices. The management has reduced its FY25 sales guidance to 17.5mt from 18mt given in Q2 and 19.2mt in Q1 due to challenging steel markets. SAIL’s performance is set to improve further with imported coking coal prices expected to decline by ~Rs1,000/t in Q4 and flats prices likely to rise in coming months. SAIL has maintained lower capex guidance for FY25 at Rs57bn, which is largely sustenance and debottlenecking capex. Although the management reiterated its growth capex for 15mtpa expansion by FY31 at various sites, only 3 projects have received Stage 1 approval, and pace of execution remains a challenge. In the first phase, 7.5mtpa expansion is planned, of which, 4mtpa addition at IISCO (at Rs370bn capex) would start from end-FY26 as the management is yet to finalize costs and vendors.

Outlook

We increase our FY26/27E EBITDA estimates by ~3/13% taking into consideration higher volume assumptions. At CMP, the stock is trading at an EV of 6.3x/4.7x FY26/FY27E EBITDA. We upgrade the stock to ‘Hold’ from ‘Reduce’ with revised TP of Rs107 (Rs110 earlier) giving 5.5x Sep’26E EV/EBITDA.

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Steel Authority of India - 13022025 - prabhu